midterm practice test Flashcards
a $100 tax credit reduces your tax more than a $100 tax deduction does
- true
- false
true
a(n) ____ is a short, specific written declaration of the reason a business exists and what it wants to achieve
- statement of intent
- affirmation of purpose
- mission statement
- declaration of principle
mission statement
the differences between actual and budgeted performance, called ___, allows managers to spot problems before they become serious
- profits
- losses
- discrepancies
- liabilities
discrepancies
a current ratio of 2:1 means that the value of current assets is twice as much as the value of current liabilities
true or false
true
true or false
consumers are individuals and organizations that determine what products and services will be available for sale
false
consumers decide what products and services will be bought
producers decide what will be for sale
which of the following is not a fundamental principle that guides the effective organization of work?
- accountability
- responsibility
- authority
- moderation
moderation
the ____ shows how much profit is being made by each dollar of sales for the period being analyzed
- net income ratio
- current ratio
- return on equity ratio
- debt to equity ratio
net income ratio
a ____ represents a unit of ownership in a corporation
- corporate bond
- certificate of deposit
- share of corporate stock
- mortgage
share of corporate stock
true or false
an entrepreneur is an economic resource
true
one important advantage of forming a partnership is that this form of business organization gives each owner sole control over the business
- true
- false
false
they share control over the business
a bond represents a debt for an organization
true or false
true
when the company is operating at a loss, the total expenses listed ont he income statement will be ____
- less than the total revenue
- more than the total revenue
- less than the total assets
- more than the total assets
more than the total revenue
each of the following is one of the three economic questions that must be answered by all nations except:
- what goods and services will be produced
- how will the goods and services be produced
- who will receive the profits earned when goods and services are produced
- what needs and wants will be satisfied with the goods and services produced
who will receive the profits earned when goods and services are produced
without personal savings, businesses could not carry out capital projects
true or false
false
which of the following is not one of the six basic activities that all businesses perform?
- raising capital
- buying goods and services
- conserving resources
- generating ideas
conserving resources
service businesses are the fastest growing part of the US economy
- true
- false
true
unity of command means there is _____
- a single person in charge of a business
- an overall plan that tells each employee what to do
- a clear reporting relationship for all staff of a business
- a way for ideas to flow from employees to managers
a clear reporting relationship for all staff of a business
true or false
deflation has occurred in the US
true
technology has allowed people to work fewer hours
- true
- false
false
XYZ Company produces and sells five products. People who specialize in production and marketing are assigned to each product. XYZ company has a ____ organization structure.
- unity of command
- functional
- matrix
- corporate
matrix
when you purchase a corporate bond, you become one of the corporation’s ___
- owners
- creditors
- equity holders
- borrowers
creditors
in a ____ the resources are owned and controlled by the government
- command economy
- traditional economy
- market economy
- mixed economy
command economy
the ____ tells you if the business will be able to pay its debts whent hey are due
- current ratio
- debt to equity ratio
- return on equity ratio
- net income ratio
current ratio
jamal’s family has assets of $250,000, including $160,000 of value in their home. the family has $80,000 in liabilities. what is the family’s net worth?
- $10,000
- $170,000
- $330,000
- $490,000
$170,000
250000-80000=170000
(trick question because you don’t use the 160000)
a mortgage or rent payment is a(n) ____
- fixed expense
- variable expense
- personal asset
- deficit
fixed expense
the easiest form of business to start and end is a(n) ____
- limited liability partnership
- S corporation
- franchise
- proprietorship
proprietorship
a ____ occurs when a government spends less than it takes in
- budget deficit
- budget shortage
- budget over run
- budget surplus
budget surplus
which of the following is an example of a service?
- the shingles that are used to put a new roof on your home
- the effort of the worker you hire to put a new roof on your home
- the hammer that is used to install the new shingles on your home
- the increased value of your home after a new roof is installed
the effort of the worker you hire to put a new roof on your home
in what type of business organization is each owner personally liable for all business debts, even if the debts were created by other owners?
- corporation
- partnership
- proprietorship
- S corporation
partnership
when preparing a cash flow statement, include ____ under Cash Inflows
- a gross pay before taxes and deductions
- gross pay less taxes only
- net income or take home pay
- interest on mortgage
net income or take home pay
true or false
when there are many competitors in a market, individual businesses are not able to easily raise their prices
true
if one company raises the price of the item, people will buy that same item from another company
groups of people form consumer cooperatives to ___
- purchase goods and services more cheaply than they could as individuals
- reduce the amount of property taxes that each member must pay
- generate a profit for each member of the group
- increase their political power in their community
purchase goods and services more cheaply than they could as individuals
most US businesses have no employees other than the owner
- true
- false
true
more than 72% of US businesses employ only the owner
a current ratio of 1:2 represents an unhealthy business situation
true or false
true
an employee using direct deposit will receive a paycheck printed electronically to take to the bank
- true
- false
false
only recieve a paystub, do not have to take anything to the bank
if you want to save money at a savings institution, you would be most interested in the ____
- prime rate
- discount rate
- certificate of deposit rate
- t-bill rate
certificate of deposit rate
current liabilities are amounts owed by the business that will be paid off within two years
- true
- false
false
will be paid off within one year
physicians, web designers, and furniture movers are ____
- intermediaries
- nonprofit corporations
- manufacturers
- service businesses
service businesses
a manager who supervises inexperienced employees can have a greater span of control than one who supervise experienced employees
- true
- false
false
managers supervising inexperienced employees have to watch them and help them more than those whose supervise employees that are experienced
policies are descriptions of the way work is to be done
- true
- false
false
____ refers to the quantity of a good or service that businesses are willing and able to provide
- supply
- demand
- scarcity
- trade off
supply
consumer debt includes each of the following except ____
- unspent consumer income
- home mortgages
- unpaid credit card balances
- auto loans
unspent consumer income
gross domestic product (GDP) is the dollar value of all ____
- final goods and services produced in a country during one year
- goods and services produced in a country during one year
- intermediate and final goods and services produced in a country during one year
- final goods and services produced in, or imported to, a country during one year
final goods and services produced in a country during one year
all of the following can increase productivity except ____
- improved technology
- better training for workers
- improved management techniques
- increased wages for workers
increased wages for workers
the consumer price index (CPI) is a measure of ____
- inflation
- consumer debt
- retail sales
- interest rates
inflation
the right side of the balance sheet lists ____
- liabilities
- assets
- owners equity
- liabilities and owner’s equity
liabilities and owners equity
true or false
debt is harmful to a company
false
in a market economy, a marketplace is always a physical location where economic transactions take place
true or false
false
think of amazon - you can’t go to their physical location to buy stuff
____ records identify the amount assets have decreased in value due to their age and use
- asset
- depreciation
- accounts receivable
- accounts payable
depreciation
actual sales and expenses for a specific period are reported on the ____
- operating budget
- balance sheet
- income statement
- payroll record
income statement
when many more people wish to purchase a product, its price will tend to ____
- stay the same
- fall
- decline only to rise again
- increase
increase
the ____ is the interest rate that banks make available to their best business customers
- discount rate
- corporate bond rate
- morgage rate
- prime rate
prime rate
revenue minus expenses equals ____
- total assets
- total liabilities
- owner’s equity
- profit or loss
profit or loss
on a family budget, the savings category is listed as a(n)
- asset
- income
- expense
- variable
expense
a business with a debt to equity ratio of 3:1 may have trouble borrowing additional funds from a bank
true or false
true
market price is determined by all of the following except
- competition
- opportunity cost
- demand
- supply
opportunity cost
a producer that mines coal is a(n)
- wholesaler
- extractor
- manufacturer
- retailer
extractor
the primary reason why businesses invest resources and take risks is to ___
- provide jobs
- produce goods and services
- improve their products
- earn a profit
earn a profit
a ____ must name a board of directors that will make the major policy and financial decisions for the business
- limited liability company
- proprietorship
- corporation
- limited liability partnership
corporation
an excise tax is a type of tax on ____
- purchases
- property
- wealth
- earnings
purchases
gross domestic product (GDP) per capital is calculated by ___
- dividing GDP by the total population
- multiplying GDP by the total population
- dividing GDP by the Consumer Price Index
- multiplying GDP by the Consumer Price Index
dividing GDP by the total population
a demand curve illustrates the relationship between quantity demanded of a product and ____
- quantity supplied
- price
- profit
- production costs
price
which of the following is not a principle upon which the US economic system is based?
- private property
- freedom of choice
- government regulation
- competition
government regulation
if owners have total equity of $1,000,000 in the business and the business has net income (profit) of $10,000, the return on equity is _____
- 10%
- 1%
- 0.1%
- 100:1
1%
10000/1000000=.01 then change to % by moving decible over 2 spots
to check: 1000000x1%=10000
what tool for money management is a plan for spending and saving income?
- balance sheet
- budget
- cash flow statement
- financial plan
budget
on a balance sheet, the value of your home is listed under ____, while the amount you still owe on your home mortgage is listed under ____
- assets; liabilities
- liabilities; assets
- net worth; liabilities
- liabilities; net worth
assets; liabilities
a functional organizational structure is a diagram that shows the structure of an organization, classifications of work and jobs, and the relationships among those classifications
- true
- false
false
examples of long term assets are ____
- inventory and accounts receivable
- buildings and equipment
- mortgage debt and accounts payable
- none of these choices
buildings and equipment
financing requirements for a major business expansion are based on the ____ budget
- start up
- operating
- cahs
- business
start up
over the past 50 years, the proportion of women who work outside the home has ____
- stayed almost the same
- grown very slowly
- declined slightly
- grown significantly
grown significantly
true or false
the US is the largest producer of goods and services int he world
true
most disability income insurance will pay ___
- 80 - 90% of your salary
- 60-70% of your salary
- 100% of your salary
- 100% of your salary plus all medical expenses related to your disability
60-70% of your salary
the amount of social security benefits a retiree receives each month depends on ___
- how much the retiree saved while employed
- how much the retiree earned while employed
- the retiree’s need
- the amount of the retiree’s pension
how much the retiree earned while employed
the recurring ups and downs of gross domestic product (GDP) in an economy is called the _____
- stock market
- bond market
- money cycle
- business cycle
business cycle
economic decision making is the process of deciding _____
- how to spend your time
- how to use your income
- which needs and wants will be satisfied
- whether to buy products now or later
which needs and wants will be satisfied
money management means never spending, doing without things, and not having any fun
- true
- false
false
an estate tax is paid ____
- at the time of purchase
- on a specific due date
- when a person dies
- once or twice a year
when a person dies
if you want to itemize deductions, you must use Form ____
- 1040A
- W-2
- 1040
- 1040EZ
1040
sources of information to help build a budget for a new business include all except ____
- past financial records
- the small business administration (SBA)
- published financial information on similar businesses
- professional associations
past financial records
what is the formula for calculating owner’s equity?
- total assets minus total liabilities
- total revenue plus total assets
- current assets plus long term assets
- total revenue minus total expenses
total assets minus total liabilities
if intermediate goods were counted as a part of gross domestic product (GDP), the value of these goods would be counted twice
true or false
true
FICA refers to ____
- unemployment taxes
- social security and medicare taxes
- income taxes
- payroll taxes
social security and medicare taxes
all people above 16 who are actively working or seeking work make up the ____
- unemployment rate
- creditor pool
- labor force
- labor organization
labor force
most nations of the world can be classified as having a ____
- command economy
- market economy
- traditional economy
- mixed economy
mixed economy
in preparing your income tax return, you may itemize deductions and take a standard deduction
- true
- false
false
you can only take one or the other - so take either the deductions on what you itemize or the standard deduction
the first step in the decision making process is to _____
- identify the choices
- define the problem
- evaluate advantages and disadvantages of each choice
- review your decision
define the problem
with a traditional individual retirement account (IRA)
- contributions are tax deductible
- investment gains are tax deferred
- funds may be withdrawn without penalty after age 59-1/2
- all of these choices
all of these choices
you do not have to pay tax on ____ income
- tax deferred
- earned
- tax exempt
- investment
tax exempt
____ are precise statements of results a business expects to achieve
- goals
- policies
- strategies
- articles of incorporation
goals
if you are an employee of a company, your net pay is ____
- the same as your gross pay
- your gross pay minus deductions
- your gross pay minus deductions minus tax withholding
- your gross pay minus deductions minus tax withholding minus direct deposit
your gross pay minus deductions minus tax withholding
suppose you are preparing your federal income tax return for the year 2012. what is deadline for filing this return?
- january 1, 2012
- january 1, 2013
- april 15, 2012
- april 15, 2013
april 15, 2013
true or false
the basic economic problem results from scarcity
true
____ include tools and equipment used to produce goods and services
- natural resources
- human resources
- capital resources
- consumer resources
capital resources
your checkbook and bank statements are an effective budgeting system
- true
- false
false
true or false
there has never been a true depression in the US
false
____ is a period in which demand begins to decrease, businesses lower production, unemployment begins to rise, and GDP growth slows for two or more quarters of the calendar year
- depression
- deflation
- recession
- recovery
recession
true or false
things that are required in order to live are wants
false
they are needs
a budget variance
- is a difference between budgeted and actual spending
- may be a deficit
- may be a surplus
- all of these
all of these
the process of good money management should start with knowing your current financial status
- true
- false
true
